Environmental regulatory pressures and the short-term debt for long-term investment of heavy-polluting enterprises: quasi-natural experiment from China.

The behavior of short-term debt for long-term investment (SFLI) will probably worsen the business status of the enterprise and increase the financial risk of the enterprise. Will the credit term structure of heavily polluting enterprises improve or worsen as the environmental regulatory pressure increases? This study takes the implementation of China's new Environmental Protection Law (NEPL) as a quasi-natural experiment to evaluate the impact of environmental regulatory pressure on the short-term debt for long-term investment behavior of heavy-polluting enterprises by the approach of Difference-in-Differences (DID). The results reveals that the NEPL significantly helps heavy-polluting enterprises achieve a more sustainable development mode by alleviating their maturity mismatch problem between investment and financing of heavy-polluting enterprises, which is conducive to reducing business risks. The impact mechanisms test shows that environmental regulatory pressure is likely to inhibit their investment and financing behavior, and might generate a crowding-out effect of innovation. When considering the heterogeneity of enterprise, the impact of the NEPL is not significant in state-owned enterprises, key-monitoring enterprises, and large-scale enterprises. However, the non-consistent effect as well as the innovation crowding-out effect, need more collaborative governance countermeasures. This paper reveals the consequences of environmental regulation policies from the view of corporate's credit term structure and provides new evidence for supporting the Porter hypothesis through addressing the dilemma of SFLI in heavily polluting enterprises.